Abstract

The EU has had a special agreement with their former colonies in Africa, the Caribbean and the Pacific Islands, the ACP-countries, for almost 30 years. This has granted the ACPs with preferences on the Europen market, which have been excluded from other countries. The agreement is now beeing re-negotiated to make it more in terms with the rule of the WTO's most favoured nation-principle. The new agreement will differ from the present one as it will be a mutual free trade agreement where the ACP countries will open their markets to the EU as much as the EU opens up it's market to them. Another diffrence is that the big ACP group will be devided into several smaller groups that will negotiate with the EU independent from each other. One of these groups is Eastern and Southern Africa, ESA, where Madagaskar,Malawi, Uganda, Zambia and Zimbabwe are included.
The purpose of this study is to find the welfare consequenses of different forms of free trade agreements between the EU and ESA. The purpose is also to see which groups that win and which that lose from the agreements. Two different scenarios are examined. The first is a free trade agreement where all sectors are included. In the second scenario, agricultural products are excluded from the agreement in a simular way as in the present agreement. These two scenarios are compared with the situation today with respect to trade and welfare. The method used is the general equilibrium model GTAP.
The results show that a free trade agreement between the chosen African countries and the EU where all sektors are included, generates positive welfare changes for most of the African members but negative changes for Uganda, EU and the groups excluded from the agreement.The positive welfare changes springs from the increased income from the expanded sugar export due to the reduction of the high tariffs in EU on sugar. The world market price on sugar will increase when the excess burden is reduced. This is in favour for the net exporters but leads to negative terms of trade effects for the net importers Uganda and the EU. The excluded countries reduce their export since their tariffs are the same as before the agreement,this makes their products relatively more expensive compared with the competing member countries. In the second scenario, where agricultural products are excluded, all countries get negative welfare changes except the EU. The African member countries loose a great deal of their governmental revenue from the reduction of the tariffs on industry products. This is not outweighted by an increased income as in the first scenario. The income decreases like the demand in those countries. The EU will experience an increase in demand from the African member countries when the industry tariffs are removed and therefore gain from the agreement.